Microsoft on trial: DOJ gives heavy memo fire

The Department of Justice is turning up the heat on Microsoft with a series of memos it claims prove anticompetitive behaviour by the software giant. Bill Gates' deposition is due tomorrow.

Government attorneys hammered away at key Microsoft positions during the morning sessions, using several previously released documents along with new ones to paint the company as a uniquely lethal predator of would-be competitors.

Tuesday was Netscape CEO James Barksdale's day to weathered the fire as attorneys for the government and Microsoft traded questions about whether Netscape was really threatened with extinction if it didn't accept an illegal market division scheme designed by Microsoft.

In short succession, Government attorney David Boies produced internal notes from Microsoft executives and Apple's financial director, all of which contradicted key assertions made by Microsoft lawyers in their four-day cross examination of Barksdale.

Microsoft's Warden had earlier called Netscape's account of attempted market division a "concoction" and a "fantasy." Microsoft Monday seems to have modified its story, suggesting that the meeting in fact was a "setup," designed to create a false record for antitrust officials to follow. But Microsoft memos presented this morning and already referenced in opening arguments last week seemed to support Netscape's version of events.

Boies splashed a June 1 memo, from Microsoft Senior Vice President for Consumer Systems, Paul Maritz to Microsoft Chairman, Bill Gates onto the screen in the courtroom. Maritz wrote the email 20 days before the alleged market-division proposal took place. Maritz set out several goals for the company's relationship with the upstart browser maker.

"Number two is move Netscape out of the Win32 client area," Maritz wrote.

"Do you know what Win32 is?" Boies asked.

"I sure do," Barksdale said. "It's another name for Windows 95."

The memo continued: "Avoid hot or cold war with Netscape," Maritz wrote. "Keep them from sabotaging our platform evolution." Microsoft has argued throughout the course of the trial that the companies' warm relationship prior to the June 21 meeting makes tales of "market division" or "predatory behavior" unlikely.

Microsoft attorney John Warden took issue with his interpretation of "win32" in a final round of cross-examination in the afternoon. Didn't "win32," in fact, refer to a set of application programming interfaces, or technologies that make writing programs to run on Windows 95 and Windows NT easier, he asked?

"In most shops, no," Barksdale replied.

But Microsoft had already talked about providing much of the programming all browsers need to work in order to keep others from having to write it themselves. "Doesn't that mean Netscape should use the Internet plumbing exposed by the Win32 APIs?" Warden asked.

"No, it does not," was Barksdale's terse reply.

Clark's 'moment of weakness'

The government's Boies went after Microsoft arguments regarding a Dec. 29, 1994, e-mail from then-Netscape CEO Jim Clark. In the message to Microsoft executive Dan Rosen, Clark had offered to sell his company rather than continue to compete. Microsoft cites this as still more evidence that the two companies were never at loggerheads as portrayed by Netscape.

Barksdale subsequently said Clark told him about the offer only eight months later. Clark described it, he said, as a "moment of weakness" only a week before Barksdale was slated to take his job from him. Microsoft's had Warden cast doubts on that version of events.

Again, Boies produced corroboration -- this time a videotape of Clark himself being deposed by Microsoft attorneys months before the trial began.

"I suppose you could just say it was a moment of weakness and fear on my part," Clark told his inquisitors. Microsoft rejected the offer the next day. "After (Microsoft Senior Vice President Brad) Silverberg closed the door," Clark said, "we never looked back."

The smoking Apple memo

Barksdale had also previously testified that top executives from Apple Computer Inc. told him Microsoft had refused to update its Office for Macintosh software package unless Apple went along with its demands regarding Microsoft's Internet Explorer browser. Unless Apple included Internet Explorer software with all computers it sold, he said, it would lose the most popular application written for them and, with it, their viability as a business.

Under cross-examination by Microsoft, however, Barksdale failed to produce documents to back up his assertion.

Boies produced a document this morning. In his own hand, Apple Chief Financial Officer Frank Anderson had written a set of notes documenting the conversation Barksdale said he had had with Apple in August of last year. "Jim, this is FA, CFO of Apple," the script read. "I (am) calling to discuss yesterday's Microsoft announcement.

"Apple needed to ensure that Microsoft would continue to provide MS Office for Mac or we were dead. They were threatening to abandon Mac. Trading card was making Internet Explorer default browser."

Microsoft: More than browser

Boies seemed to think the issue was settled, but Warden came back to the memo in the afternoon. In addition to the browser deal, the note also mentioned a widely reported $150 million, non-voting investment Microsoft made in Apple along with an agreement to settle a long-standing feud over patents Apple said Microsoft violated when it wrote its Windows operating system.

"We also had a patent dispute that was resolved with cross-license and signed (sic) payment to Apple," Anderson wrote in the following paragraph. "$150 M inv. in Non-voting shares was also part of deal. We want to continue business relationship w/ Netscape," he concluded. "I believe a signif. % of our customers will continue to 'select' Netscape's browser in spite of default to Microsoft."

Didn't that mean there was more at stake than just a browser? Warden asked.

No, Barksdale said. "He told me and (former Apple CEO) Gil Amelio told me" that the browser and Office were part of a single deal. The rest, he said, was unrelated.

Barksdale's testimony ended as the trial concluded its sixth full day. As in days previous, lawyers from each side accused the other of taking quotes out of context. Bill Gates' videotaped testimony is to take the stand tomorrow.

Gates, whose comments were expected to be presented Tuesday via a videotaped September deposition, was neither seen nor heard due to the extended questioning of Barksdale. The first half of eight hours of Gates' deposition is expected to follow on Thursday, because live witnesses will present testimony today.